Illinois’ budget bill includes provisions that eliminate the state’s conformity with Internal Revenue Service (IRS) Code 280E which will allow state-licensed cannabis businesses to take some normal business deductions, according to a report from Tenth Amendment Center. Section 280E prohibits businesses from deducting otherwise ordinary business expenses from gross income associated with the “trafficking” of Schedule I or II substances, as defined by the federal Controlled Substances Act, and applies to cannabusinesses in states that have legalized cannabis.
The bill also includes language to direct funding to a cannabis development fund and extend the deadline for conditional cannabis business licensees to find a storefront.
The budget bill was approved this week by both chambers of the Illinois legislature and Gov. J.B. Pritzker (D) is expected to sign it into law.
Minnesota’s newly-signed adult-use cannabis law also decouples the state’s tax regime from IRS Code 280E.
In a National Cannabis Industry Association policy paper, Henry Wykowski, a California attorney who works with cannabis clients on tax issues, said that “Section 280E de-incentivizes people from filing tax returns” and “penalizes people who are trying to be transparent and operate within the law.”
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